“Necessity is the mother of invention”
Yes, and today’s necessity is digitization of financial transactions. It is paradoxical that in spite of one of the fastest growing economies of the world; still our country has 190 million unbanked adults. (Source: Business Standard). The rejection rate for mortgage is around 70% (source: YourStory) and most of the loan aspirants have to go through physical collection of documents and manual intervention which scale up the cost.
As the country is going through a complete digital transformation, FinTech companies are playing vital role by promoting the financial inclusion of people from all walks of life, such as individuals, small and micro industries. They have designed a common portal where individuals can compare and access various financial services provided by multiple banks, insurance companies and AMCs. Indeed, online portals are beyond a plain comparison; they also provide customers with proper guidance from beginning to end.
FinTech is the combination of technology in finance. Applying for a loan, buying insurance, and investing online is no different from shopping and booking appointment online. A sharp upturn in sales of mobile phones and internet is the driving force behind the digitization of financial transactions.
|% Urban Consumers||2016||2018||2020|
|Digital Footprint: Access to internet||23%||45%||75-80%|
|Digital Influence: Used Internet During Purchase Process||9%||30%||50-55%|
|Digital Buyers: Purchased anything Online||3%||23%||35-40%|
Source: BCG 2017 Digital India Report
The two major benefits of online fintech company are –
A common portal for loans provides complete details about all banks’ loan schemes. You can thus apply to many banks using a single form. The customer can then compare the offers and avail one as per their requirement.
There are many stakeholders that have brought about a revolution in this industry in the Indian economy. Three major stakeholders are:
Banking sector is promoting the fintech industry by adopting its innovations. Banks are collaborating with start-up fintech organization through blockchain technology. Blockchain is a path-breaking system that is used to store large ledgers of data virtually and has potential to replace the traditional style of updating KYC, lending funds and making payments.
Start-up companies are paving the way for financial inclusion of masses and creating initiatives towards digitizing India. In recent years, especially after demonetization, they have encouraged and helped citizens to go cashless. Currently, there are more than 200 fintech start-ups across segments in India that could make financial services cost-effective and more efficient.
The Government of India has taken initiative like Startup India and established Rs. 10,000 crore FFS (Funds of funds for startups) to meet financial needs of innovative startups (Source: The Times of India)
Apart from Startup India, the Indian Government has set up an UPI (Unified Payment Interface) system. UPI is a real-time payment system that helps in instantly transferring the money between two bank accounts through mobile platform. UPI enables multiple bank accounts to get into a single mobile application and is helping in unifying the citizens towards ‘cashless India’ scheme.
Fintech has a huge market potential. Currently it is only 3% of organized retail lending market; <0.1% that of total market. Mutual fund penetration in India is just 1.23% (Source: AMFI, CRISIL). However, in the light of the constructive initiatives of Government and increasing digital footprints, the mutual fund investment is likely to increase correspondingly.
After e-commerce, fintech is the next booming sector. With the launch of Digilocker, Jan Dhan Yojana, expanding broadband connectivity to Gram Panchayats, EKYC services and more than 1,50,000 kms of optical fibre laid under Bharat Net – the market of fintech ecosystem is expanding. The expanding market will generate employment opportunities across varied sectors in an unprecedented way.
This post is written by Ms. Rachna Suneja, CEO of AFinoz.com, an online financial marketplace whose tie ups cover more than 99% market in banking and MF industry in India.